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A new globalisation? For whom?

Published at: 18-10-2018

Posted on: October 18th, 2018 by RaduC No Comments

I recently had the opportunity to attend an INSEAD conference, the prestigious European postgraduate school branding itself as “The Business School for the World”.  The event was entitled “Managing disruption at the Board and Executive level”.

It was a select gathering, with participants from the academia everywhere and also board and executive managers at some of the biggest global names. A mixed group meant to share its vast experience, but also make us grasp the international elites` perspective on the world.

The main point they made was that globalization overall is not in retreat, but moving into a new phase. The old globalization as a global market made up of all domestic markets added together is on the wane, while a new form of globalization which switches from “global markets” to a “global world” is emerging.

Digitization is the catalyst of the transition. Even though globalization and digitization have been coexisting for over a decade, technological advances caused them to be a booster to each other. Digitization brought globalization to a tipping point acting as a cathalyst, while globalization spread digitization to all corners of the world. The theory of those attending was that the new globalization was no longer about flows of capital or goods, but rather about massive flows of data and information crisscrossing the entire world.

The freedom and speed at which data travel around the globe creates interconnections between experts, help them share and improve their skills and finally turn into small unique virtual hubs of expertise with a significant competitive edge. Technology led to globalization having less and less to do with connecting businesses and more with connecting people.

The explosion of information is such that erecting walls along the border becomes ridiculous. Instead of globalization as a sum of parts we are switching to a world in “emergence” where the whole has properties that its individual parts lack. We are going from globalization as a sum of parts to globalization with characteristics that the mere aggregation of its components failed to produce.

Under these circumstances, globalization stops being a concept defined by geography but rather by time. Digital systems make possible the remote virtual “presence” in real time, rendering distances irrelevant.

The technological disruptions triggered by digitization undermine the countries` historical accruals of capital, wealth and even know-how. They are transformations which see both developed and developing countries stand on the same starting line and in which the most important factor is the intelligence capital. In some industries this gives developing countries an edge against the rich countries. It also puts the countries which for centuries have dominated the technological world in a new position which causes them deep concern.

In the last decades, the competitive advantages have been considered to be the national attributes of Germany, the US, Japan, and so on, and exporting these cultural models to countries was thought to be the key of success for the companies these countries set up abroad. We are currently moving on into a new phase where the competitive advantage is “meta-national”.

Superiority will no longer stem from national cultural traits, but from the ability of national or multinational entities and groups to get organized and be run effectively. These new developments will lead to a paradox. The more global the world gets, the more insignificant the advantages of multinationals as local groups will be able to partner much easier across the borders. Ironically, the more globalized the world, the easier it will be to tap into the pool of local skills, raising their relevance.

I will stop here with these theories which necessarily make us ponder, even though, I think that they rather describe the early days of individual cases which are still far from becoming the norm for teh time being. Do I subscribe? Partially, as I explained in the post “We rode the third wave. Will the fourth drag us under?”.

I think that the current digital revolution, unlike the previous information revolution, will be less democratic. Whereas the first created winners in every country with an intelligence capital, the current transformation largely relies not just on smartness, but financial resources.

True, they are both void of nationality. Both the financial and the intelligence capital can regroup across borders so as to make the most of the opportunities out there. This does not address, however, the major problem which is about to emerge and which is summed up by a straightforward, but crucial question:

Who will be the winner of the new globalization?

The old one was initiated by the financial elites with the support by political elites for its financial perks and wealth it was due to bring them. It was a success in so far as globalization also created a second class of winners and advocates: the emerging countries. They saw a significant number of their inhabitants moving out of poverty and experienced a thriving middle class. The losers were the middle classes in the rich world, a reality which has now backfired: the rise of nationalism and populism which has pushed the British, the French, the Germans, the Italians, but also the Americans to fight back via protest votes.

The “new globalization” mentioned by the distinguished guests of INSEAD, even under the assumptions set out by the panelists, is about to create a much more limited category of winners: the financial and the intellectual elites. The “globalization for the people” and against businesses, that I heard professed at the conference, will actually be a trend to the benefit of a rather small group of people in a position of power: they are either managers of large pots of money or holders of intelligence or unique skills which renders them indispensable to the ongoing tech transformation. Please note that this is a revolution which will indiscriminately hit workers in both developed and developing countries. The World Economic Forum estimates that in the next five years 5 million jobs will be lost in 15 major emerging AND developed countries, after taking out the newly created jobs.

This situation will lead to worldwide increase in social polarization at the expense of generating a sound global middle class. Political radicalism is just one step away. Those holding the reigns of national policies seem puzzled by and completely passive in understanding the political extremism that they are faced with today. So the phenomenon continues to sweep over the US and Western Europe undisturbed.

Will countries such as India or China be able to stave off social tensions, nationalist and populist trends once large numbers of workers in many industries will lose their jobs as they are replaced by automated systems and AI? Let`s not forget that the World Bank expects to see 2/3 of jobs in the emerging economies at risk of being displaced by the digital revolution.

So, with these thoughts on my mind, I put up my hand and asked the distinguished panel of international elites and champions of the new globalization the question:

“As the winners in the old globalization were the international elites and developing countries, who will win from the new globalization given that it will indiscriminately affect people in all countries, irrespective of how developed they are?”

What do you reckon? Did they answer?

Have a good weekend!

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